JUDGMENT 1. - The petitioner, a private limited company with its registered office at Sawai Madhopur, on being encouraged to promote the hotel industry in Sawai Madhopur had applied for grant of loan for construction of an hotel at Sawai Madhopur. They were required to submit the report along with her application fee of Rs.3,900/- which they complied with. On submitting the application and going through all the formalities, the petitioner was sanctioned a loan of Rs.38,00,000/- vide Annexure-1. The petitioner had to pay another amount of Rs.19,000/- for processing as processing fee, /service charges and then necessary documents were executed. An equitable mortgage was also executed. The loan was sanctioned or 22.2.1988. The first instalment of As. 1,13,000/- was given in December, 1988. The petitioner started construction. It is averred by the respondents that the loan was to be released on receiving the progress of construction. All of a sudden the disbursement of loan was stopped without passing any order. In the discussions held in between the petitioner and the respondents, the company was asked to remove Shri Pradeep Baswatia from the Director ship and in response to such a discussion said Shri Baswatia had to resign as it was the grievance of the respondent that Shri Baswatia was involved in some criminal case on the complaint having been filed by some other firm in regard to his some business transaction. The process of documentation started once again on induction of new Director. 2. The second instalment of Rs.40,000/- was disbursed on 29.3.1990 which according to the petitioner was a very meagre amount for construction of hotel involving more than 20 rooms. The petitioner even informed the RFC of the progress. The petitioner was asked to send the progress report for further disbursement of loan. A valuer was sent. Third instalment was issued on 9.2.1993 amounting to Rs.93,515/-. As a matter of fact the RFC had been adjusting the part of instalments towards interest as well. The 4th instalment was disbursed of Rs.90,000/- whereas 5th and 6th instalments were disbursed on 12.12.1993 for an amount of Rs.1,12,000/- and Rs.44,900/-. The result of not disbursing the instalments in time or delayed instalments was perhaps because of certain ulterior motives. Money was being demanded, as alleged by certain officers of the RFC. A complaint to CBI was made by the company. The result of not disbursing the instalments in time or delayed instalments was perhaps because of certain ulterior motives. Money was being demanded, as alleged by certain officers of the RFC. A complaint to CBI was made by the company. An FIR No. 30/93 was registered against Shri Roodmal Aswal, the then Branch Manager, RFC, Sawai Madhopur and said Branch Manager was caught red handed for taking bribe from the petitioner company on 23.11.1993 and ever since the petitioner started feeling the pinch of involving the Branch Manager in the bribe case which matter is being investigated by the CBI against RFC. Approaches made by the petitioner to the Finance Minister and the Deputy Chief Minister brought no result. Instead of looking into the matter and releasing the balance of the amount, the RFC respondent issued a notice dated 23.7.1996 for repayment of the loan amount of Rs.15,58,421/- along with interest at the rate of 19.75% and 23% with threat that if the amount is not cleared action would be taken under Section 29 of the Act. The notice is attached as Annexure-24. 3. It is stated by the petitioner that as a matter of fact the RFC had bye-passed the purpose for which the RFC has been constituted, to promote the industrialisation and instead of helping the petitioner, the RFC had betrayed the petitioner company. It is stated that instead of Rs.30 Lacs of loan, an amount of Rs.6,91,000/- had been disbursed from the period from 1989 to 1992 and out of the above said amount the RFC had already deducted an amount of Rs.1,14,715/- towards interest and, therefore. a total amount of Rs.5,76,285/- had been disbursed. It is stated that the petitioner had invested more than Rs.20 lacs and have constructed 15 rooms with attached Lat-bath, Dinning Hall, Bar room, Restaurant, Kitchen upto roof level. The construction had to be stopped because of the omission of the RFC. a total amount of Rs.5,76,285/- had been disbursed. It is stated that the petitioner had invested more than Rs.20 lacs and have constructed 15 rooms with attached Lat-bath, Dinning Hall, Bar room, Restaurant, Kitchen upto roof level. The construction had to be stopped because of the omission of the RFC. Perforce the petitioner has filed the present writ petition stating; (1) that the RFC had created such a situation that the company had to lodge an FIR with the CBI and the Branch Manager Sawai Madhopur was arrested red handed for taking bribe and because of this reason the RFC is now enemical to the petitioner; (2) that because of the reason that one of the Director was involved in some private complaint in regard to certain other business transaction, the RFC had made an issue to remove the Director and to induct a new Director which had to be agreed by the company at the insistence of the RFC; (3) that the RFC had been negligent in disbursing the loan and have caused such an inordinate delay that the petitioner had to suffer an irreparable loss in the construction and cost of construction. 4. The petitioner had attached Annex. 4 alongwith the Writ Petition in which it has been stated that the construction had been brought up to plinth level and in Annexure 5 the petitioner had asked the respondents to send the valuer. On 8.9.1993 the respondents had directed the petitioner to be present in the office for discussion on revision of the cost of the project. The petitioner had informed vide Annexures 10 and 11 that the RFC is un-necessarily delaying the matter and the petitioner is suffering heavy loss. There are many documents attached including the letter of the Government issued to the RFC for looking into the representation of the petitioner and also to decide the matter expeditiously as is clear from Annexure 17 dated 9.12.1993 issued by the Industries Department of the State of Rajasthan to the Managing Director, RFC, Jaipur. 5. Vide Annexure-20 issued on 3.9.1994 the RFC had informed the petitioner that the matter is under consideration and the team of the officers shall be visiting the site. The crux of the matter is that the petitioner had been representing time and again. 5. Vide Annexure-20 issued on 3.9.1994 the RFC had informed the petitioner that the matter is under consideration and the team of the officers shall be visiting the site. The crux of the matter is that the petitioner had been representing time and again. A modified documentation was also done by the respondents wherein under clause (iii) of such documentation Annexure-8 it was mentioned that the first instalment shall fall due on the first day of October 1992. This document itself is dated 23.10.1992. 6. Reply has been filed by the respondents. It is admitted that the amount of Rs.38 lacs was sanctioned for hotel project named as Pushpam Hotel and it is also admitted that the petitioner had spent Rs.19,000/- for processing and execution of the documents. It is stated that a complaint had been filed against one of the Director before the Metropolitan Magistrate, Bombay, copy of which complaint has been attached by the RFC as Annexure R-1, and it is also admitted that on discussion it was agreed that the said Director shall be removed from the company and another Director would de inducted which as complied with by the company. However, it is stated by the respondent that the progress in creating the assets of the company was very slow and the valuation officer of the RFC had visited the site and loan was disbursed from time to time. It is also admitted that an FIR was got recorded by the CBI against the Branch Manager and the Branch Manager was caught red harded while taking bribe. 7. The record was also produced by the respondents for perusal. From the record nothing is revealed to show that there was any fault on the part of the petitioner company. However, on 28.8.1992 it seems that the Branch Manager had shown some apprehension to the effect that one of the Director of the company Revindra Kumar had earlier taken a loan of Rs.1,05,000/- for purchase of Mahindra Jeep from the Corporation in February 1988 and the loan amount had been transferred at Sawai Madhopur without any reason. It was further mentioned that the company had deposited back the amount of Rs.66,000/- on 3.8.1992 and an apprehension was expressed by the Manager that there is possibility that after getting the disbursement from the Corporation, the company may not construct further building. This letter is numbered as reference No. RFC/SWM/3193/92-93. It was further mentioned that the company had deposited back the amount of Rs.66,000/- on 3.8.1992 and an apprehension was expressed by the Manager that there is possibility that after getting the disbursement from the Corporation, the company may not construct further building. This letter is numbered as reference No. RFC/SWM/3193/92-93. However, despite the above said imaginative apprehension, on deed of modification was executed in September 1992 and a modified agreement was made between the parties. After September 1992 there is no record produced to show any correspondence or action or progress in the case. 8. From the above said narration of facts based on record it is revealed; (i) that the loan was sanctioned for an amount of Rs.38 lacs; (ii) that proper documentations was made by the parties; (iii) certain instalments were also released though complete amount was not released and interest due was deducted from the instalments itself; (iv) the RFC wanted one of the Directors to be removed because of certain private complaint filed against him in some Bombay Court because of his private and personal business relations; (v) illegal gratification was asked by the Branch Manager; (vi) being compelled the CBI report was made and CBI's FIR was got registered; (vii) a raid was made on the Branch Manager and the Branch Manager was caught red handed while taking bribe and a criminal CBI case is pending against him qua this very company; (viii) there is no record to show that the company had ever not completed its obligations so far as construction etc. is concerned; (ix) despite repeated requests of the company for visiting the place, the officers did not'act expeditiously; (x) there are photographs produced by the parties on record to show that the construction had been completed upto roof level in regard to all the rooms along with attached bathroom, halls etc.; (xi) no .effort was made by any of the officer to visit the place and to obtain the latest report in regard to construction; (xii) no order is forth-coming on the file to stop the payment of disbursement of loan and still further instalments of loan have not been disbursed at all; (xiii) there are extraneous considerations in regard to certain loan taken for Mahindra Jeep by one of the Director and the Branch Manager had shown his apprehension that if the loan is disbursed that will not be utilised for construction of the building without going into the matter whether the building has been constructed and upto what level; (xiv) In about four years a petty amount of over Rs. six Lacs was disbursed out of which an amount of Rs.1,14,715/- as interest was deducted even though the hotel business had not started running and instead of completing its obligations as required to be done by the RFC, a recovery notice had been sent for refund of the amount of Rs. 15 lacs against the total loan of Rs.6 Lacs. 9. The question arises whether the RFC had acted bona fidely and in accordance with the rules and regulation and agreement and whether any effort was made by the RFC to abide by the rules framed by it or an effort was being made by the officers of the RFC to finish up the enterprise of the petitioner because of the reason that the petitioner had successfully got the Branch Manager trapped by the CBI while accepting bribe. Despite the fact that no order has been produced or attached on the file or on record in the writ petition or in reply regarding stopping or recalling of loan, the loan had not been disbursed. 10. Despite the fact that the right upto 1984 and 1985 as per-the representations attached with the writ petition wherein even RFC was sized of the matter right upto July 1995 that matter was under consideration, the matter was never considered. What should be done in such circumstances. 11. 10. Despite the fact that the right upto 1984 and 1985 as per-the representations attached with the writ petition wherein even RFC was sized of the matter right upto July 1995 that matter was under consideration, the matter was never considered. What should be done in such circumstances. 11. The Supreme Court in Gujarat State Financial Corporation v. M/s Lotus Hotels Pvt. Ltd. AIR 1983 SC 848 had laid down certain guidelines for the financial Corporations wherein it was held that `on its solemn promise evidenced by the documents, the Enterpriser increased expresses, suffers liability to set-up an hotel and if the loan does not forth-come as promised, the loanee is bound to suffer further liabilities to implement and execute the project and thus the promissory estopple would certainly come into play.' It was held that the principle of promissory estopple would estop the Corporation from backing out from its obligation arising from a solemn promise made by it to the loanee. It was further held as under : 'Further, the rule inhibiting arbitrary action by the Government would equally apply where such corporation dealing with the public whether by way of giving jobs or entering into contracts or otherwise and it cannot act arbitrarily and its action must be in conformity with some principle which meets the test of reason and relevance.' 12. Direction was given by the Apex Court to release loan of Rs.10 lacs within the stipulated time of one month and the balance required to be spread over within a reasonable time so as not to give any inconvenience to the parties. It was observed as under : "How a public sector corporation set-up to give impetus to industrial development of the country, as promise of planned economy aimed at job expansion to liquidate the curse of un-employment, and larger production helping price stabilisation acts in a manner contrary to its raison deter and becomes counter-productive is aptly illustrated by the facts of this case. "By that time, the promised equitable mortgage by the Company was created in favour of the Corporation. All other document, required to be executed by the Company in favour of the Corporation enabling it to receive the loan were also executed. However the appellant did not disburse the loan In terms of the agreement entered into between, the parties. "By that time, the promised equitable mortgage by the Company was created in favour of the Corporation. All other document, required to be executed by the Company in favour of the Corporation enabling it to receive the loan were also executed. However the appellant did not disburse the loan In terms of the agreement entered into between, the parties. Ultimately, after protracted correspondence, the Board of the Corporation at its meeting held on April 20, 1979 resolved not to disburse the loan to the respondent company and the President conveyed the information of the decision to the Company. There is some dispute between the parties about when the intimation about the resolution of the appellant was conveyed to the respondent but that is hardly relevant." "By its letter of offer dated July 24, 1978 and the sub- sequent agreement dated February 1, 1979 the appellant entered into a solemn agreement in performance of its statutory duty to advance the loan of Rupees 30 lakhs to the respondent. Acting on the solemn undertaking the respondent proceeded to undertake and execute the project of setting up a 4 Star Hotel at Baroda. The agreement to advance the loan was entered into in performance of the statutory duty cast on the Corporation by the statute under which it was created and set-up. On its solemn promise evidenced by the aforementioned two documents, the respondent incurred expenses suffered liabilities to set-up a hotel. Presumably, if the loan was not forthcoming, the respondent may not have undertaken such a huge project. Acting on the promise of the appellant evidenced by documents, the respondent proceeded to suffer further liabilities to implement and execute the project. In the back drop of this incontrovertible fact situation, the principle of promissory estopple would come into play." "Thus, the principle of promissory estopple would certainly estop the Corporation from backing out of its obligation arising from a solemn promise made by it to the respondent." "Even then, it was held that when the officer authorised under a scheme enters into an agreement and makes a representation and a person acting on that representation puts himself in a disadvantageous position, the Court is entitled to regulate the officer to act according to the scheme and the agreement or the representation. The officer cannot arbitrarily on his mere whim ignore his promise on some undefined and undisclosed grounds of necessity or changed the conditions to the prejudice of a person which had acted upon such representation and put himself in an disadvantageous position. On this point, both the decisions concur and the ratio would govern the decision in this appeal. The respondent acting upon the solemn promise made by the appeilant incurred huge expenditure and if the appellant is not held to its promise, the respondent would be put in a very disadvantageous position and therefore also the principle of promissory estopple can be invoked in this case." "Viewing the manner from a slightly different angle altogether, it would appear that the appellant is acting in every unreasonable manner. It is not in dispute that the appellant is an instrumentality of the Government and would be 'other authority' under Art.12 of the Constitution. If it be so, as held by this Court in R.D. Shetty v. International Airports Authority of India, (1979) 3 SCR 1014 at p. 1041; ( AIR 1979 SC 1628 ) at pp. 1641-42) , the rule inhibiting arbitrary action by the Government would equally apply where such corporation dealing with the public whether by way of giving jobs or entering into contracts or otherwise and it cannot act arbitrarily and its action moat be in conformity with some principle which meets the test of reason and relevance." "Now if appellant entered into a solemn contract in discharge and performance of its statutory duty and the respondent acted upon it, the statutory corporation cannot be allowed to act arbitrarily so as to cause harm and injury, flowing from its unreasonable conduct to the respondent. In such a situation, the court is not powerless from holding the appellant, to its promise and it can be enforced by a writ of mandamus directing it to perform its statutory duty. A petitioner under Article 226 of the Constitution would." Certainly lie to direct performance of a statutory duty by other authority as envisaged by Art.12. The High Court accordingly was fully justified in issuing a writ of mandamus to disburse the loan and therefore, the appeal fails." 13. A petitioner under Article 226 of the Constitution would." Certainly lie to direct performance of a statutory duty by other authority as envisaged by Art.12. The High Court accordingly was fully justified in issuing a writ of mandamus to disburse the loan and therefore, the appeal fails." 13. In Mahesh Chandra v. Regional Manager, U.P. Financial Corporation and others AIR 1993 SC 935 the Hon'ble Supreme Court had given certain guidelines and directions which were necessary to be observed by the Financial Corporation while exercising powers under section 29 of the Act which were as under "Every endeavour should be made, to make the unit viable and be put on working condition. If it becomes unworkable: 1. Sale of a unit should always be made by public auction. 2. Valuation of a unit for purpose of determining adequacy of offer or for determining if bid offered was adequate, should always be intimated to the unit holder to enable him to file objection if any as he is vitally interested in getting the maximum price. 3. If tenders are invited then the highest price on which tender is to be accepted must be intimated to the unit holder. 4. (a) If unit holder is willing to offer the sale price, as the tenderer, then he should be offered same facility and unit should be transferred to him. And the arrears remaining thereafter should be rescheduled to be recovered in instalments with interest after the payment of last instalment fixed under the agreement entered into as a result of tendered amount. (b) If he brings third parties with higher offer it would be tested and may be accepted. 5. Sale by private negotiation should be permitted only in very large concerns where investment runs in very huge amount for which ordinary buyer may not be available on the industry itself may before such nature that by normal buyers may not be available. But be one taking such steps there should be advertisements not only in daily newspapers but business magazines and papers. 6. But be one taking such steps there should be advertisements not only in daily newspapers but business magazines and papers. 6. Request of the unit holder to release any part of the property on which the concern is not standing of which he is the owner should normally be granted on condition that sale shall be deposited in loan account." Section 29 confers very wide power on `Corporation' to ensure prompt payment by arming it with effective measure to realise the arrears. But the simplicity of the language is not an index to enormous power stored in it. From notice to pay the arrears, it extends to taking over management and even possession with a right to transfer it by sale. Every wide power, the exercise of which has far reaching repercussion, has inherent limitation on it. It should be exercised to effectuate the purpose of the Act. The exercise of discretion should be objective. Test of reasonableness is more strict. The public functionaries should be duty conscious rather than power charged. Its action and decisions which touch the common man have to be tested on the touch' stone of fairness and justice. Power under section 29 of the Act to take possession of a defaulting unit and transfer it by sale requires the authority to act cautiously, honestly fairly and reasonably. Corporation deal with public money for public benefit. The approach has to be public oriented, helpful to the Ioanee, without loss to the Corporation S. 24 of the Act itself required the Board `to discharge its function on business principles, due regard being had to the interest of Industry, commerce and general public.' Business is a word of wide import. It has no definite meaning. Its perceptions differ from private to public sector or from institutional financing to commercial banking. The Financial Corporations under the Act were visualised not as a profit earning concerns but an extended arm of a welfare State to harness business potential of the country to benefit the common man. "The Corporation or its officers or servants as trustee are bound to exercise their power in good faith in selling or dealing with the property of the debtor as a ordinary prudent man would exercise in the management of his own affairs to preserve and protect his own estate. "The Corporation or its officers or servants as trustee are bound to exercise their power in good faith in selling or dealing with the property of the debtor as a ordinary prudent man would exercise in the management of his own affairs to preserve and protect his own estate. Therefore, the acts of the officer or servant of the Corporation should be reasonable, just and fair which must meet the eye and the offer accepted must by of competitive and every attempt should be made to secure as maximum price as possible to liquidate the liabilities incurred by the industrial concern or the debtor under the Act." 14. Because of the law laid down by the Hon'ble Supreme Court and in peculiar facts in the present case, it can be safely held that the omission on the part of the respondent RFC for not releasing the disbursement of further instalments of loan were neither required nor desired nor was bonafide. There was deed silence on the part of the RFC and it seems that incomplete building, rooms and other structures upon which the petitioner must have spent more than 20 lacs of rupees as per the minimum estimate, stood like selection and looked like ghost to the petitioner, but every time he approached the respondent RFC, the reply was the same that the matter was under consideration, ultimately the petitioner approached this court by way of present writ petition. 15. Viewing from any angle or from any direction, it is one case where there seems to be deliberate attempt on the part of the RFC to finish the hotel undertaking taken by the petitioner on the promise of sanction of loan by the respondent RFC. Though, there is nothing on record to justify the dead silence of the RFC, it is not Imaginable as to how RFC could even otherwise demand the return of loan from the income of half finished building. It is the duty of the Financial Corporation who advances the loan to see that not only the enterprise taken by the loanee is completed at the earliest possible and the progress is made according to schedule and instalments are released well before time so that the work should not stop, but it is also one of the very important obligation of the RFC to see that no a fatal blow is given to such enterprise. In the present case, out of 38 lacs of rupees about Rs.6 lacs were released for construction of very huge structure. Interest was deducted from instalments itself. It is high time the officers of the RFC to reconsider its policy and make provisions of re-payment of loan on the completion or starting of the business. It Is un-imaginable that the loanee is asked to repay the loan when the construction is still on and has not been completed. Such policy of the RFC requires retrospection so that the real purpose for which the Financial Corporation had been established is achieved. 16. In the present case the RFC had failed in all respects in completing its obligation and the petitioner had to suffer badly. It is a fit case where a direction is required to be handed over to RFC. to disburse the loan immediately and take all necessary steps for said disbursement within 45 days from the receipt of certified copy of this order. A similar direction as handed over by Hon'ble Supreme Court in the case of Gujarat Financial Corporation is required to be given. The RFC shall release a lumpsum amount of Rs.10 Lacs to the petitioner within stipulated period and the remaining amount shall be spread over. 17. Because of the reason that no fault has been attributed to the petitioner and the petitioner has been brought to the present situation because of the omission and commission of the Financial Corporation itself, the interest shall be chargeable at the same rate as was agreed in the deed. However, it is made clear that for the period that loan was not disbursed or till it is disbursed, the Financial Corporation is not entitled to charge any interest from the petitioner and the amount shall be adjusted accordingly. 18. For the reasons and discussions above, the present writ petition is allowed with the directions as mentioned above. The Financial Corporation shall pay cost of Rs.10,000/- to the petitioner which cost can be recovered by the RFC from its defaulting officers.Writ Petition allowed with costs quantified Rs. 10,000/- *******